0820 GMT April 26, 2018
The bill, approved by a 64 to 51 vote, is the latest blow to remaining hopes for a two-state solution, AFP reported.
Formulated by Shuli Moalem-Refaeli of the far-right Jewish Home party, it came weeks after US President Donald Trump's decision to recognize Beit-ul-Moqaddas as Israel's capital sparked deadly protests in the Palestinian territories.
Nabil Abu Rdainah, a spokesman for Palestinian President Mahmoud Abbas, described Trump’s policy shift on Beit-ul-Moqaddas and the passage of the amendment as “a declaration of war against the Palestinian people”.
“The vote clearly shows that the Israeli side has officially declared an end to the so-called political process,” Abu Rdainah said, referring to US-sponsored talks on Palestinian statehood that collapsed in 2014, Reuters wrote.
The bill determines that any ceding of lands considered by Israel to be part of Beit-ul-Moqaddas would necessitate a two-thirds majority vote in parliament – 80 out of 120 members of the Knesset.
It also enables changing the municipal definition of Beit-ul-Moqaddas, which means that sectors of the city "could be declared separate entities," a statement from parliament read.
Israeli right-wing politicians have spoken of unilaterally breaking off overwhelmingly Palestinian areas of the city in a bid to increase its Jewish majority.
Israel occupied East Beit-ul-Moqaddas and the West Bank in 1967. It later annexed East Beit-ul-Moqaddas in a move never recognized by the international community.
It claims all of Beit-ul-Moqaddas as its united capital, while the Palestinians see the eastern sector as the capital of their future state.
The issue is among the most contentious in the Israeli-Palestinian conflict.
Opposition head Isaac Herzog said Jewish Home was leading Israel “toward a terrible disaster”. Jewish Home’s leader Naftali Bennett said the vote showed that Israel would keep control of all of Beit-ul-Moqaddas forever.
Dov Henin of the opposition's mainly Arab Joint List said the new law should be called "the law to prevent peace".
"Without an agreement on Jerusalem (Beit-ul-Moqaddas) there will be no peace," he said ahead of the final vote. "The law means that there will be bloodshed."
Trump's December 6 decision upended decades of precedent and broke with international consensus, but maintains that Beit-ul-Moqaddas’ final status would have to be decided in negotiations between the two sides.
The new law is however not necessarily definitive. It can be changed by a regular parliamentary majority of 61.